Australia Managed Investment Trusts Guide

the Managed Investment Trusts (the "MITs") and the Attribution Managed Investment Trusts (the "AMITs") in Australia. The guide covers: the MIT overview (the "the investment vehicle for the managed funds and the ETFs") — the "Managed Investment Trust (the MIT)" is the "taxation regime" for the "managed funds" (the "the unit trusts that carry on the investing activities"); the MIT rules apply to the "Aussie-based managed funds, the ETFs, the REITs, the A-REITs, the infrastructure funds, the credit funds" and the "other collective investment vehicles"; the "MIT status" allows the "fund" to be treated as the "flow-through entity" — the "income and the gains are taxed at the investor level, not the fund level"; the "MIT tax rates" — the "MIT withholding tax at 15%" for the "non-resident investors" on the "MIT fund payments" (the "the reduced rate under the MIT regime"); the "resident investors" pay the "marginal rates" on the "MIT distributions" (the "including the franking credits, the foreign income, the capital gains, the tax-deferred amounts"); the AMIT regime (the "Attribution Managed Investment Trust — the modernised MIT") — the "AMIT regime" (the "from the 1 July 2016" — the "Tax Laws Amendment (New Tax System for the Managed Investment Trusts) Act 2015") is the "elective regime" that provides the "flexibility for the character flow-through" and the "cost base adjustments" for the investors; the "key AMIT features": (a) the "attribution of the income and the gains" to the "unitholders at the end of the income year" (the "the unitholder is assessed on the attributed amounts regardless of the distribution"), (b) the "unders and the overs" — the "adjustment for the under-attribution or the over-attribution" in the "next year" (the "the trust can adjust the attribution for the earlier year without the amendment of the tax return"), (c) the "cost base adjustment" — the "unitholder adjusts the cost base of the units" for the "tax-deferred distributions" and the "tax-free distributions".

MIT Distributions and the Tax Treatment

Distribution components: The "MIT distributions" (the "the fund payments to the unitholders") include: (a) the "dividend income" (the "the franked dividends from the Australian companies" — the "grossed-up including the franking credits"), (b) the "interest income" (the "the interest from the bank accounts, the bonds, the fixed-income securities"), (c) the "foreign income" (the "the foreign dividends and the foreign interest" — the "the foreign tax credits may be attached"), (d) the "net capital gains" (the "the gains from the sale of the investments within the fund" — the "the 50% CGT discount may apply at the fund level"), (e) the "tax-deferred amounts" (the "the return of the capital, the depreciation, the capital gains not subject to the tax within the fund" — the "reduces the cost base of the units"), (f) the "tax-free amounts" (the "the exempt income, the non-assessable non-exempt income" — the "reduces the cost base of the units").
Year-end tax statements: The "MIT" and the "AMIT" issue the "annual tax statement" (the "the AMIT Member Annual Statement (the AMAS)" for the AMITs) at the "end of the income year". The statement shows the "attribution of the income and the gains" to the "unitholder" — the "grossed-up dividend", the "franking credits", the "foreign income", the "net capital gains", the "tax-deferred amounts", the "tax-free amounts". The "unitholder uses the AMAS" to "prepare the tax return" — the "amounts are included in the assessable income" and the "deductions and the credits are claimed".
CGT cost base adjustments: The "AMIT unitholder" must "adjust the cost base of the units" for the "tax-deferred distributions" and the "tax-free distributions". The "tax-deferred distribution" (the "the capital gains discount component, the depreciation") — the "cost base is reduced by the tax-deferred amount". The "tax-free distribution" (the "the non-assessable non-exempt income") — the "cost base is reduced by the tax-free amount". The "cost base cannot go below zero" — the "excess above the cost base is treated as the capital gain".

For the ETF investing and the tax treatment, see our ETFs Guide →.

MIT Withholding Tax for the Non-Residents

MIT withholding tax rate: The "non-resident investor" in the "MIT" is subject to the "MIT withholding tax" on the "fund payments" that are the "Australian-sourced income". The "standard MIT withholding tax rate" is the "15%" for the "MIT fund payments". The "reduced rate" at the "10%" for the "fund payments from the MIT investing in the "clean buildings" and the "housing" (the "the concessional MIT rate"). The "non-resident company" pays the "30% withholding" on the "non-MIT fund payments".
Foreign resident capital gains withholding: The "non-resident unitholder" selling the "MIT units" may be subject to the "CGT withholding" at the "15% of the sale proceeds" if the "units are the "indirect Australian real property interests" (the "the fund holds the substantial Australian real property"). The "withholding threshold" is the "$750,000" for the "sale of the MIT units".
Tax treaty implications: The "tax treaties" may provide the "reduced MIT withholding rates" for the "non-residents" from the "treaty countries" — the "US rate at 15%", the "UK rate at 15%", the "Japan rate at 10%", the "New Zealand rate at 15%". The "non-resident must claim the treaty benefit" through the "ATO withholding variation" or the "tax return".

For the foreign resident CGT withholding and the non-resident tax rules, see our Foreign Resident CGT Withholding Guide →.

AMIT Regime and the Investor Reporting

Attribution system: The "AMIT attribution system" — the "trust attributes the income and the gains to the unitholders at the end of the income year" based on the "unitholder's share of the trust at the attribution time". The "attributed amount" is the "assessable income of the unitholder" regardless of the "distribution timing". The "AMIT must provide the AMAS" within the "3 months of the year end" (the "the 30 September for the 30 June year end").
Unders and overs: The "unders and overs" — the "AMIT may under-attribute or the over-attribute the income to the unitholders in the year". The "under-attribution" — the "trust can attribute the additional amount in the following year" (the "the catch-up attribution") — the "unitholder declares the extra amount in the following year". The "over-attribution" — the "trust can reduce the attribution in the following year" — the "unitholder reduces the assessable income in the following year". The "unders and overs" prevent the "amendment of the tax return" for the "minor attribution errors".
Cost base adjustment method: The "AMIT cost base adjustment" is the "CGT event" when the "unit is sold" — the "adjusted cost base reflects the tax-deferred and the tax-free distributions". The "CGT cost base after each distribution" — the "unitholder must track the cost base adjustments" for the "accurate CGT calculation". The "AMAS provides the cost base adjustment information" — the "tax-deferred amount" and the "tax-free amount" are listed on the "statement".

For the LICs, the LITs and the other listed investment vehicles, see our LIC and LIT Guide →.